'By virtue of exchange, one man's prosperity is beneficial to all others.' – Frédéric Bastiat

Nova Scotia’s Tourism Ferry Tales

Nova Scotia has historically relied on sound marine infrastructure to move goods, services, and people around the province, the country, and other countries. Travel and transportation from Nova Scotia to the United States and other jurisdictions in Atlantic Canada is quicker by sea than by land and investing in such infrastructure is useful, but sometimes politically motivated.

Such is the situation surrounding the Nova Star Cruises in Yarmouth, Nova Scotia

First and foremost, the provincial government has invested millions of taxpayer dollars into the ferry despite several problems plaguing it since the 1970s. Moreover, negotiations surrounding it have not been transparent and elected officials who support the ferry, which connects Yarmouth to Portland, Maine, more than likely do so for political, rather than economic, reasons.

Initially, the Nova Scotia government approved a seven-year $21 million subsidy to the ferry operator, Nova Star Cruises, which that company spent wholly in its maiden season. Following the initial subsidy, the provincial government forwarded to Nova Star Cruises an additional $5 million to cover expenses, and shortly after, it sent another $2.5 million for staffing fees and transportation costs.

It remains unclear why, or how, Nova Star Cruises spent $21 million that was meant to last for seven years and it is possible that the provincial government has given the ferry operator additional funds that have not been disclosed publicly. Economic and Rural Development Minister Michel Samson, for example, initially and unequivocally stated that the provincial government had only paid out a total of $26 million, but later, following a government report on the ferry expenses, it forked out an additional $2.5 million, raising the total to $28.5 million. This discrepancy may appear minor, however, the fact that Nova Scotia’s government is mum about these expenses is concerning.

Aside from issues of transparency and government accountability, investing in the ferry service seems to have been misguided. The Nova Scotia Tourism Agency, for instance, attempted to quantify how impactful the ferry has been on the Nova Scotia economy and found that it may have contributed to an $11 million increase in hotel revenue. In other words, for every dollar the government spends to use the ferry as a means of attracting tourists to the province, they get less than half of a dollar in return, which even Keynesians would agree is a terrible multiplier.

The provincial government will announce its plans for the 2015 Nova Star Cruise ferry service within a few days, and although I suspect the announcement will include additional subsidies for the ferry operator and a “feel good” plan to attract more tourists, the provincial government should rethink its tourist strategy in southwest Nova Scotia. Tourism numbers have been increasing steadily in Nova Scotia recently and it is doubtful that the ferry service is having a large enough effect on the local economy to warrant such large cash injections. Moreover, the operator employs only 20 individuals from the province.

Instead, the government should focus on increasing the presence of short-distance ferries for transportation. One major problem facing local fisherman and processors is not having the ability to transport their fish to markets outside of Nova Scotia at a low-cost and before their product expires. Reefer trailers, which fishermen use to transport their product from the point of processing to consumers in other jurisdictions in Canada and the United States, are costly and time-consuming; increasing ferry capacity for trucks and trailers transiting to Portland and New Brunswick would better service the community than focusing solely on tourism.

Provincial governments in Nova Scotia focus on promoting tourism because residents in that province have bought into the idea that it is a tourist destination constrained by a lack of accommodating and appealing services, i.e. if the provincial government simply invests in tourism infrastructure, Nova Scotia will shine as a tourist destination. This perception of the issue compels elected officials to lobby for projects that do not necessarily provide real benefits to Nova Scotians. A fair compromise would be to follow the Marine Atlantic approach in Newfoundland and Labrador, which is to ferry passengers and transport goods and services.

In the end, this issue is another example of how government can mismanage an issue that has a clear and simple solution.

Corey Schruder is an AIMS on Campus Student Fellow who is pursuing an undergraduate degree in history at Cape Breton University. The views expressed are the opinion of the author and not necessarily that of the Atlantic Institute for Market Studies